March 11, 2014

Feb. Employment Report’s Raw Numbers Were Miserable; As Usual, Press Ignored

Filed under: Business Moves,Lucid Links,Marvels,Stock Schlock — Tom @ 9:33 pm

On Friday, the government’s Bureau of Labor Statistics reported that the economy created 175,000 seasonally adjusted jobs in February, with 162,000 of the additions occurring in the private sector.

That result exceeded expectations of roughly 150,000, and caused the business press to sing odes of high praise to an economy that was amazingly overcoming this year’s difficult winter weather. Unfortunately, as readers will see after the jump, February’s raw results demonstrate that it was all an illusion.


April 28, 2012

The Election Should Be All About Barack Obama’s Record

Three likely stark reminders of just how bad it is will arrive just before Election Day.


On April 13, at Swampland, a blog at what’s left of Time magazine, Joe Klein took Bill Galston at the New Republic to task for daring to write that Barack Obama’s successful reelection will be difficult “if the people don’t approve of his record.”

That’s about as non-controversial as it gets — but not for good ol’ Joe, who called Galston’s assertion “political science mythology.” Klein proceeded to offer three elections (2008, 1988, and 1976) which supposedly showed that a president’s record in office doesn’t matter. Readers can and should be forgiven for wondering why he chose those three campaigns, given that none of them involved incumbents seeking reelection.

In the interest of bringing Klein up to speed, let me remind him of the three of the four most obvious relatively recent instances when the incumbent president’s record was of the utmost importance (the fourth is Bill Clinton’s defeat of Bush 41 in 1992, which was built on Clinton’s lie about “the worst economy in the past 50 years,” Bush’s breaking of his “no new taxes pledge,” and most critically the quixotic candidacy of Ross Perot).

In 1980, Jimmy Carter was seeking reelection against challenger Ronald Reagan. Carter’s administration was busily producing inflation, unemployment, and high interest rates all at once, a trifecta once thought impossible. It wasn’t the “killer rabbit” that did Carter in, just as it won’t be Obama’s youthful penchant for eating dog meat; it was the brutal economy. Despite a third-party effort by John Anderson which probably pulled more votes away from Reagan than Carter, Reagan won in a landslide.

In 1984, Reagan was the incumbent. All the Gipper needed to do to win against the hapless Walter Mondale was:

  • Demonstrate that his age wasn’t an issue — which he did, while wisecracking that he wouldn’t hold his opponents’ youth and inexperience against him.
  • Plaintively ask: “Are you better off now than you were four years ago?” For the vast majority of Americans, the answer was a resounding “Yes.”

What resulted was a 49-state Electoral College rout.

In 2004, George W. Bush sought reelection against John Kerry. While the challenger had many shortcomings, not the least of which was his failure to remember who was president in December 1968 (Kerry referenced something said by Dick Nixon, but the president at the time was still lame duck Lyndon Baines Johnson, making his “Christmas in Cambodia” story an obvious fable), the election was really about Bush’s record on the economy, his prosecutions of the Iraq War, and progress in the overall War on Terror. The country was very divided on the matter, but Bush prevailed.

So while it would be nice from Joe Klein’s and Barack Obama’s perspective if the 2012 campaign were about, oh, I don’t know, Obama’s well-recited movie introductions, Michelle Obama’s frequent TV appearances, and their kids’ vacations (oops, we’re not allowed to talk about that), the 2012 campaign  – like it or not, guys — will be primarily about what Obama has and hasn’t done during his first term.

The central problem with Barack Obama’s presidential record is that it is chock full of records — almost all of them painful, harmful, or both. What follows are just a few of them, focusing in the interest of space on the economy and the federal government’s finances.

Most trillion-dollar annual deficits rung up (as well as the only ones): 4.

The deficit during the last eight months of the fiscal year which ended on September 30, 2009, the first eight full months of Obama’s presidency, was $1.02 trillion. That was followed by full fiscal-year deficits of just under $1.3 trillion in 2010 and 2011. The Congressional Budget Office estimates that fiscal 2012′s full-year deficit will be $1.2 trillion. Unless David Axelrod’s Ministry of Information Management (otherwise known as the Obama For America campaign) intervenes, the Treasury Department will release final results for fiscal 2012 in mid-October, right in the middle of early voting and about three weeks before Election Day.

Most consecutive months of seasonally adjusted unemployment above 8%: 38, and counting.

Every single full month of Obama’s presidency has seen an unemployment rate at least that high. Other related records are far too numerous to specifically mention, but there is no reasonable doubt that the pain inflicted on the long-term unemployed during the barely noticeable to non-existent recovery has been far more severe than at any time since the Great Depression, and markedly worse than what we saw for a relatively brief time during the early 1980s. The recent surge in jobless claims and March’s disappointing job creation make it fairly likely that the unemployment rate won’t fall below 8% before Election Day — and even if it does, the shocking shrinkage in the workforce during Obama’s term will render such a result completely unimpressive.

Unless it also gets the ax from Axelrod, the Bureau of Labor Statistics will issue the October employment report on November 2, the Friday before Election Day.

Number of post-recession quarters required for a post-World War II economy to return to its pre-recession size: 9.

Believe it or not, the previous record was three. And since Obama’s best buddy these days seems to be Warren Buffett, I should note that based on the personal benchmark of the billion-dollar ower of Omaha, we’re far from achieving a true recovery, which he defines as when “real per capita GDP gets back to where it was before.”

The government’s last report on economic growth will arrive on October 26; I don’t think David Axelrod will have the nerve to try to delay that one, no matter what it says. That’s eleven days before Election Day. There’s no good reason to believe it will be anywhere near the 4%-plus annualized growth needed for meaningful job creation coming out of a recession (or in this case, out of a barely noticeable to non-existent recovery). Forecasts for full-year growth in 2012 tell us that attaining even the 3% needed to claim anything resembling acceptability will be difficult.

No president since World War II has a poorer record of economic and fiscal stewardship than Barack Obama. The frightening tax hikes on the horizon for January 2013, increases he will almost certainly allow to take effect once he’s reelected, will make his first term seem like a picnic. His only hope appears to be to pretend that it’s 1936 and, as Franklin Delano Roosevelt did that year, make the election about demonizing the successful and convincing the disengaged that it is noble to confiscate and redistribute their income and wealth.

The world has changed quite a bit in the past 76 years, and a president’s ability to hide the truth from the public is nowhere near what it was when FDR reigned supreme but presided over a tragically underperforming economy. But I wouldn’t rule out Obama’s ability to successfully play the envy and class warfare cards, especially given the Republican Party’s decidedly non-conservative nominee. Heaven help the American people if a majority of us let him get away with it.

March 21, 2012

Latest PJ Media Column (‘Obama’s Broken Window Company — And His Larger, More Serious Damage’) Is Up

SeriousEnergyReprieve022412It’s here.

It will go up here at BizzyBlog on Friday (link won’t work until then) after the blackout expires.


The main (but far from the only) point of the column is that, as I feared when it happened in December 2008, President-elect Barack Obama’s expressed solidarity with the workers who occupied Republic Windows — without calling out their lawlessness and demanding that they leave — sent a chilling message to the business community which has been confirmed time and time again since he has taken office, namely that hiring full-time employees is something to be avoided. When the country’s chief executive-in-waiting condones lawlessness (and then engages in it himself once installed), it brings — and has brought — terrible consequences for the entire nation.

The news which drove the column occurred in late February, when California-based Serious Energy, which bought the moribund Republic Windows plant a few months after the plant’s occupation, announced that it would close the Chicago plant once and for all. Naturally, workers — this time only about 60 instead of over 200 — occupied the plant again, and Serious promised to keep the plant open for 90 days and to try to find a buyer (I don’t wish them ill, but good luck with that). The few news accounts which were filed usually mentioned Joe Biden’s visit to the plant in April 2009, but none I read or saw mentioned Barack Obama’s chilling “I think they’re absolutely right” December 2008 statement, which was a clearly far more relevant turning point.

There is so much more to the Republic Windows/Serious Energy story than I could possibly have squeezed into an already overstuffed column that I will get to some of it here.

The Pigford Effect

As the column notes, the administration’s $5 billion weatherization program “has been an epic fail, accurately characterized as a “a complete cesspool of waste” by the conservative fiscal watchdog group Citizens Against Government Waste.”

An emailer made a very pertinent point about this, which ties back to the Pigford debacle, where a few probably valid claims of discrimination against black farmers decades ago turned into a class action lawsuit with more far more participants than ever engaged in farming, really on two levels.

The emailer noted that “Pigford attracted fraudulent claims because the government opened their checkbook. So fake black farmers came out of the wood work and claimed they had been wronged.”

The emailer, upon learning that the Federal Trade Commission obtained a consent agreement in February from Serious and four other window makers for making wildly exaggerated claims of energy savings from installing their windows (up to 40%-50% vs. a reality of 7%-15%), noted that “Green energy window companies made up fraudulent claims of green energy savings to the consumer because they knew the government was footing the bill,” and that “Private investors or venture capital folks would have tested the claims by Serious and others.”

True enough. Another aspect to this, borne out in the massive complaints about the quality of the work done under the program in several states which likely barely scratch the surface, is that the weatherization program also attracted fly-by-night and crooked contractors who either didn’t know what they were doing or deliberately cut corners and did shoddy work knowing that the government was footing the bill. The charitable and not-for-profit groups who were given the money for the program were in many cases woefully inexperienced to manage such an enterprise.


Serious’s Chairman Kevin Surace was named Inc. Magazine Entrepreneur of the Year in 2009; based on the related write-up, the selection looks comes off as a suck-up to the Obama regime. Though he has received other, less tainted accolades, the FTC complaint certainly mars Surace and his company’s reputation. I should also note that Serious has been refashioning itself as a “developer of cloud-based energy management software” and de-emphasizing its manufacturing (though plants in PA and CA remain open).

Surace gave $5,000 to Obama for America in September 2011. I didn’t find evidence of other political contributions by Serious execs.

The company’s board has at least one obvious Democrat ringer: Reed Hundt, former chairman of the Federal Communications Commission, who habitually imagines that there must be a “right-wing power grab” going on whenever the topic of deregulation comes up.

Lots of hype, little in results results

The company definitely over-promised what it would do for the Chicago plant’s workers; as the column notes, it “never hired back more than 75″ of the plant’s 200-250 workers. That certainly isn’t the impression Joe Biden had in 2009:

Wow. In retrospect, the horse manure in Biden’s speech was neck-deep. “600 workers on three shifts”?

February 29, 2012

Slow ‘Recovery,’ Dire Consequences

What’s being sold as impressive and “normal” is unacceptable.


Note: This column went up at Pajamas Media and was teased here at BizzyBlog on Monday.


In December 2009, an Associated Press headline told us that the top business story of the year was “Recovery From Great Recession.” Readers of its text were informed that the previous year had seen the “Economy’s Fall — And Rebound.”

Twenty-six months later, the question I asked in response still resonates: “Rebound? What rebound?” Even though the American press has mostly pretended that they don’t exist, the unforgivable length of the post-recession malaise has caused an unprecedented growth in problems not seen since decades before most Americans were born.

If you’re looking for “good” news, the following sentence represents its full extent. For the first time in the ten quarters since the recession officially ended in June 2009, the private sector’s Gross Domestic Product (GDP) was larger than it was at its pre-recession peak, whether you define the recession’s beginning the way normal people do (two or more consecutive quarters of contraction, in this case beginning with the third quarter of 2008) or as the academics at the National Bureau of Economic Research whimsically determined it (December 2007):


IBDrecoveryGraphicUpdatedJan2012That’s nice, but as seen at the right in an updated version of a graphic originally posted at Investor’s Business Daily last year, even the overall recovery in GDP (including the government sector) which occurred during the third quarter of last year took three times as long as any recovery from any downturn since World War II.

Demonstrating that he may need to employ a ghostwriter to compose his personal correspondence in order to prevent him from going off-message, President Barack Obama informed a Maine constituent in June of last year that “It will probably take another year or two to fully dig our way out of this hole.”

This demonstrates that despite the public posturing, Obama knows full well that this nation hasn’t attained an economic recovery, and is in fact far from it.

Other benchmarks indicate how bad things really are, starting with per capita GDP. By Obama buddy Warren Buffett’s reckoning in September 2010, before the Oracle of Omaha decided to become the full-time Klingon of class warfare, we were still in a recession, and would stay in one “until real per capita GDP gets back to where it was before.” We’re probably at least a year from that threshold:


Thus, we will have endured a half-decade of Buffett-defined recession.

The other major indicator that we have had a failure to recover is shown in the jobs numbers — not the ones relating to the overall picture, which are bad enough, but the ones breaking down part-time versus full-time employment. The following chart shows what has happened in those categories since what I have been calling the POR (Pelosi-Obama-Reid) Economy began at roughly May’s end in 2008. This was the point when decision-making investors, entrepreneurs, and businesspeople began running for cover as the ominous prospect that Obama might actually win the presidency and have a lapdog House Speaker and Senate Majority Leader at his beck and call became a likelihood:


On the current trajectory, while Obama and his administration brag about the wonders they’ve supposedly achieved in the employment growth in the since early 2010, the economy is at least four years away from recovering the full-time jobs lost since the POR Economy began, even before considering population growth. If ObamaCare somehow survives Supreme Court challenges and congressional repeal efforts, we may see full-time employment plateau barely above where it is now.

The slow non-recovery is having dire consequences which will be felt for years. The establishment press, which fabricated the fiction that the truly roaring economy under Ronald Reagan in the 1980s was supposedly creating jobs for hamburger flippers and not much else, is virtually ignoring the frightening human cost of the worst economy since FDR dragged the country through the needlessly long-lasting depression of the 1930s. Instead, they play a colossally fraudulent game of “Let’s pretend things are just fine” with the Obama economy.

In mid-February, there was a press report about “tent cities.” No, not those erected by the pathetic losers and criminal trespassers of the Obama-endorsed Occupy movement, but places where one will find the desperately poor:

Tent cities have sprung up in and around at least 55 American cities – they represent the bleak reality of America’s poverty crisis.

… One of the largest tented camps is in Florida and is now home to around 300 people. Others have sprung up in New Jersey and Portland.

The media outlet which reported this phenomenon clearly broke ranks with the predominant press indifference. There’s a high likelihood that you never heard a word about this report, because it came from the BBC. Does anyone think that the U.S. media, which is so completely vested in Obama’s reelection that it might as well be an arm of Obama for America, is going to cover the tent city phenomenon and risk seeing them referred to as they should be, i.e., as “Obamavilles,” the 21st century incarnation of the Depression-era Hoovervilles?

Homeless advocacy groups have also gotten into the cover-up act, as illustrated in this paragraph from the 2012 The State of Homelessness in America report:

Chronic homelessness decreased by 3 percent from 110,911 in 2009 to 107,148 in 2011. The chronically homeless population has decreased by 13 percent since 2007. The decrease is associated with an increase in the number of permanent supportive housing beds from 188,636 in 2007 to 266,968 in 2011. Permanent supportive housing ends chronic homelessness.

Clever, eh? You wouldn’t know it from the excerpted paragraph, but “permanent supportive housing” is still a form of homelessness. Digging into the report to find comparable numbers, one finds that both kinds of homelessness combined have increased by over 9% during the past two years. What’s more, “The ‘doubled up’ population (people who live with friends, family or other nonrelatives for economic reasons) increased by 13 percent from 6 million in 2009 to 6.8 million in 2010.”

Meanwhile, millions of the long-term unemployed are seeing the skills which earned them middle-class standards of living dangerously erode in what is perhaps the greatest destruction of human capital this nation has ever seen. That doesn’t seem to be a problem to Obama adviser Valerie Jarrett, who positively gushes over how government unemployment checks stimulate the economy.

A slowly recovering economy means that real estate values, which declined steeply during the downturn, are just staying there. If it weren’t for the administration’s failed housing market interventions, the homebuilding and resale industries, instead of treading water near their bottom, would be coming back quickly enough to justify a meaningful rebound in home values. That’s not happening, and it’s seriously harming the financial positions of millions of individuals and families.

A president with the gall to brag about the set of conditions just described and who wants us to believe, with press assistance, that this is the “new normal,” it’s the best we can hope for, and that we’d better get used to it, is one who deserves to be electorally thrown out of office on his insecure, oversized ears.

December 18, 2008

Madoff Upate: If It Sounds Too Good to Be True …..

Well, my speculation that irregularities involving Bernard Madoff go back only a few years was incorrect. It was a guess borne of overconfidence in securities industry oversight — not regulations, which as written are more than adequate, but oversight, which is carrying out the regs.

A Wall Street Journal editorial today notes that:

Since at least 1992, when the SEC sued two accountants peddling Madoff investments while promising sky-high returns, the commission missed opportunities to dig deeper into his operations. In 1999, trader Harry Markopolos wrote that “Madoff Securities is the world’s largest Ponzi Scheme,” in a letter to the SEC. More recently, multiple SEC inquiries and exams in 2005 and 2007 found only minor infractions.

A front-page WSJ article today (subscriber-only unless you include the search engine portion of the URL) goes over what Markopolos did to try to reverse-engineer Madoff’s performance (he and others he consulted couldn’t). In 2001, Madoff supposedly had $12 billion in assets; how much of that was fictitious is apparently unknown. When he was arrested last week, the estimate was up to $50 billion. It’s clear that mostly federal but also state regulators (paging New York’s Eliot Spitzer, whose main interests were ruining others and certain extracurricular activities) should have paid more attention to Markopolos and others, and, even if people such as Markopolos weren’t raising red flags, better exercising the oversight work they have been charged to do.

(Side analogy: People should have paid more attention to mostly-GOP senators and congressmen who were warning about debacles at Fannie Mae and Freddie Mac — also clear failures of oversight — that dwarf what Madoff did.)

The Journal’s editorial notes that the SEC’s budget has tripled since 1999, but it would appear that its effectiveness hasn’t.

Madoff’s “accounting firm” (which is really “one guy“)? I wrote on Monday that if the vast majority of the losses aren’t very recent, “the CPA firm (Friehling & Horowitz) could actually be off the hook. Otherwise, they’re in fatally serious trouble.”

It’s even worse than that, as the firm, i.e., Friehling, has told the American Institute of CPAs for 15 years that it, i.e., he, doesn’t perform audits.

The next line of defense is professional peer review by another CPA firm. But if you don’t do audits, you don’t have to enroll; or if you’re enrolled, as F&H was, you don’t have to be reviewed if you don’t do audits, as this technical language-laced January 2008 guidance from the AICPA states:

(Question) Does My Firm Have to Enroll in a Peer Review Program if the only engagements it performs are Compilations issued with Engagement Letters and without a Report as detailed in SSARSNo. 8? (i.e., not reports that express an opinion on financial statements — Ed.)

(Answer) Under the AICPA bylaws, firms (or individuals in certain situations) are only required to enroll in an Institute-approved practice monitoring program when the engagements they perform are within the scope of the AICPA’s practice-monitoring standards and issue reports purporting to be in accordance with AICPA professional standards.

….. For firms already enrolled (and that stay enrolled) in the AICPA Peer Review Program, these engagements currently would fall within the scope of peer review and would require a firm to undergo a peer review.

So in theory, the AICPA could have forced F&H to go through peer review. But because of the accounting standards compliance workload involved and liability exposure, probably thousands of firms who are in the program who used to do audits or other “attest engagements” don’t do them any more. So how are you going to catch someone who says they aren’t doing audits when they (supposedly) are (or are at least putting their names on audit opinions)?

New York’s legislature has just passed a law making peer review mandatory for CPA firms doing business in the state (if you’re looking for a regulatory failure, that’s it; guess who was Attorney General and seen as a great regulator for most of the past 10 years, and “somehow” didn’t get around to this?). But there isn’t a peer review procedure for “prove that you don’t do audits” when someone says they don’t, and it could be that even under New York’s new law that another F&H could still opt out with the same excuse it used on the AICPA.

That leads back to the SEC, the regulators who presumably got the audit reports but didn’t exercise adequate oversight, even when warned for years by Markopolos and others. It also leads back to other investment firms who used Madoff, very few of whom appear to have asked of F&H, “Who are these guys?”

The Journal editorial’s conclusion, while valid, is quite a bit less than satisfying:

There’s a lesson here for investors and Congress. Instead of shoveling more money and power to the regulators who already had plenty of both, let’s take care not to overregulate the people who actually warned about Mr. Madoff’s miracle returns. Law enforcement is useful in punishing wrongdoers after the fact, which will deter some crooks. But expecting the SEC to prevent a determined and crafty con man from separating investors from their money is no more sensible than putting your life savings with a Bernard Madoff.

Their point is that the supposed security provided by regulators is not an excuse to avoid doing your own due diligence and listening to warning signs, including this one: If it sounds to good to be true, it almost definitely is. But regulators who didn’t exercise the oversight expected of them shouldn’t be getting off the hook.


UPDATE: You can’t play the “affinity warning” enough, and this Robert Cass column in today’s WSJ goes there quite well, with another “the regulators won’t save you” caution –

The Madoff tale is striking in part because it is like stealing from family. Yet frauds that prey on people who share bonds of religion or ethnicity, who travel in the same circles, are quite common.

….. In each case, the perpetrator relied on the fact that being from the same community provided a reason to trust the sales pitch, to believe it was plausible that someone from the same background would give you a deal that, if offered by someone without such ties, would sound too good to be true.

….. Predictably, the Madoff story has prompted speculation about potential new regulations that might be imposed to head off future problems. Politicians and pundits have called for the adoption of new rules for securities markets in general and hedge funds in particular, even though Mr. Madoff didn’t run a hedge fund and there is no shortage of existing securities rules that were violated by his reported conduct. (Keeping two sets of books suggests his own recognition of that.)

December 17, 2008

NewsBusters and Pajamas Media Highlights and Opinionated Extensions

At NewsBusters:

  • The Bush Derangement Syndrome-addled media is milking one Iraqi journalist’s shoe-throwing fit as if it symbolizes something beyond one guy throwing a couple of shoes. NB’s Tim Graham excoriated Washington Post reporter Sudarsan Raghavan for calling the incident a “PR Fiasco,” when Bush’s handling of the incident (“that was a size 10“; and later “I didn’t know what the guy said, but I saw his sole.”) was pretty cool and calm. Mark Finkelstein observed how MSNBC’s Tamron Hall managed to characterize these reactions as “unnerved.”
  • NB’s Clay Waters caught the New York Times claiming that the shoe-pitching journo has “hero status” in the Arab world, while Brent Baker saw the same thing on CBS’s and ABC’s evening news shoes, er, shows. Separately, I found this NYT item claiming the guy is “a folk hero in the Arab world.” Uh huh. Come back in two months and see if anyone even remembers the guy’s name. Fairness and balance would require that the multiple Iraqi journos who apologized to Bush for the incident must therefore reflect a larger microcosm of Iraqi and Arab sentiment. Stretching the NYT-ABC-CBS “logic” further, that therefore makes Bush a bigger “folk hero.”
  • NB’s Kerry Picket saw the LA Times saying that the shoe thrower is “the Middle East(‘s) ….. own version of Joe the Plumber” (JTP). Oh sure. The “only” differences are that Obama sought out JTP while on a walking tour of a neighborhood, Joe the Plumber didn’t throw anything except a few questions and some truth at Obama (come to think of it, that is a lethal weapon to a Chicago machine Democrat), and JTP didn’t insult Obama. Otherwise, they’re “exactly” the same.
  • Read the review by NB’s Brad Wilmouth of Bill O’Reilly’s interview of Ted Turner and the accompanying transcript, if you dare. CNN’s founder admits that “that he and Jane Fonda, who both opposed America’s involvement in the Vietnam War, had ignored the slaughter of millions by the Khmer Rouge communists in Southeast Asia after America’s withdrawal from the region.” He says of Fidel Castro, “I admire certain things about him. He’s trained a lot of doctors, and they’ve got one of the best educational systems in the developing world, and, you know, he’s still popular with a lot of people down there.” (Yeah, just ask ‘em, while spies and tattle-tales are everywhere.) He refuses to concede that Castro has executed dissidents.
  • The Associated Press’s Seth Borenstein wrote an item Sunday (“Obama left with little time to curb global warming”) about the impending doom from supposed global warming that is a strong contender for “Worst AP ‘Report’ Ever.” Perhaps it’s the Worst Pseudo-Science Report Ever, but the AP item reviewed here at BizzyBlog on June 22 is still the Worst Ever overall. NB’s Noel Sheppard has a collection of scientists’ reactions to Borenstein’s over-the-top claims. The best: “But it is certain that anybody who proclaims that “Global warming is accelerating” is a liar, a fool, or both.”
  • Yours truly put up an NB post last night about an amusing and childish attempt by Associated Press reporters and photographers to get some kind of leverage in contract talks — “AP Photogs and Journos Withholding Bylines; World Somehow Survives.”

At Pajamas Media:

  • Pam Meister rips John McCain — “Now that he doesn’t need conservatives anymore, the “maverick” has returned to his backstabbing ways.” There are at least three Arizona Congressmen who should seriously consider challenging McCain in the 2010 Senatorial primary. Either Jeff Flake, John Shadegg, or Trent Franks — all of whom scored over 90% with the Club for Growth — would be vast improvements. McCain scored 94% with CFG on an incomplete voting record, but his Miss Manners act, whereby conservatives can’t criticize anyone even when they’re being vilified, is beyond tiresome. His lukewarm support of Sarah Palin in the face of non-stop efforts to defame her has been disgraceful. His recent statement that people should in essence (my words) “Leggo of Blago” is bizarre. If Franks’s performance on Rush’s show yesterday while Jason Lewis was subbing is any indication, Franks would wipe the floor with McCain in a debate.
  • Richard Fernandez makes an important observation about why Bernard Madoff’s Ponzi scheme worked that I meant to get to yesterday — “Some of those who escaped ruin may have owed their survival to crass skepticism. Despite Madoff’s long record of producing returns one country club member refused to participate because Madoff would not explain his methods. In a world that ran on trust, he impolitely insisted on evidence.” The “trust” was based on affinity. The lesson is that the cleverest cons are people who successfully exploit their friendships, family, and networks (churches, social organizations, etc.). People should ask themselves, “Could I justify doing this if I DIDN’T know this person?”
  • Rand Simberg has a great riff on how UAW union-enforced work rules have contributed to the Big Three’s near demise — “What are work rules? They are agreements negotiated in the contract between management and the union covering how the employees are to be classified, how many breaks they get, how much time off they get, who can do which jobs, how discipline is to be enforced, etc. The goal of the rules is not to enhance productivity or production quality. It is to provide opportunities for featherbedding, increase numbers of (overpaid) jobs for union workers, and minimize how much they have to actually work. This is important because it’s at least in theory possible that the industry could be making money even at current wages, if they could be provided with the flexibility to increase worker productivity.” Exactly.
December 16, 2008

Couldn’t Help But Comment (121608, Morning)

SOX First has a timely post about Bernard Madoff that makes a few good and/or under-reported points, but may have missed several others:

  1. Madoff registered his investment advisory unit in 2006. Okay, but in the absence of prior improprieties in his other companies, it’s possible that Madoff’s hidden losses piled up only in the past couple of years. It’s even conceivable, given the markets’ recent steep declines, that the vast majority of his losses only occurred in the last 3-6 months (in an out-of-whack hedge fund, things can go downhill at an exponential rate). But if Madoff should have been registered earlier and wasn’t, that’s a whole ‘nother ballgame.
  2. Madoff had a very small outside CPA firm as auditor. If my guess in Point 1 about the losses only being very recent is correct, the CPA firm could actually be off the hook. Otherwise, they’re in fatally serious trouble.
  3. The SOX First post says that the SEC’s failure to inspect Madoff’s new investment advisory business is “scary.” Maybe. But if, as I suspect, the losses are predominantly recent, that ain’t so. I suspect the SEC gets thousands of these registrations a year. If my guess about the recency of the losses is right, any 2006 or 2007 “inspection” would have been routine.
  4. Following up on Point 3 — If this is a government failure, it is NOT of too little regulation, it’s of too little oversight, as is all too typically the case. There’s a big, big difference. If the regs are adequate but the oversight isn’t, you improve the oversight. All too often, oversight failures instead lead to even more convoluted regulations, accompanied by no improvement in oversight. The problem is that improving oversight is boring, while imposing new regs, no matter how redundant, costly, or useless, leads to chest-thumping photo-ops.


A Madoff lesson: Don’t have all of your money with one adviser, especially a long ranger who has control over generating account statements.

A corollary: Employers should NEVER use lone rangers to manage their pension and 401(k) funds, and should instead use only established firms with enough employees to spread the responsibility and controls around.


Post-election, John McCain has frequently acted like a jerk: Example 1; Example 2, which should be nicknamed “Leggo His Blago.”


Worth revisiting, via Hot Air:

….. minimum wage (laws) do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital.

Minimum wage laws hurt teenagers and the least skilled the most. The least skilled tend to have disproportionately high minority representation, even though they are supposedly the people most loved by the Democratic Party. That does not (logically) compute.


This is an odd and awfully polite statement to make while the Japanese auto makers continue to take market share from Detroit’s Big Three:

“There is absolutely no way in my view that the Big Three’s woes can work as a plus for the Japanese automakers,” said Tsuyoshi Mochimaru, analyst for Barclays Capital in Tokyo.

Right. Broke and desperate competitors going out of business couldn’t possibly help Toyota, Honda, or Nissan (/sarc).

December 12, 2008

Couldn’t Help But Comment (121208, Morning)

The GM-Chrysler bailout failed to get cloture in the Senate, getting only 52-35 support. The list of RINOs who supported it indicates that a bailout will breeze through the new Senate in January. That’s not okay, but “at least” Obama and his party will bear full responsibility. If we’re lucky, GM and Chrysler will be forced into bankruptcy by creditors first.

(Aside: What’s with the 12 non-votes?)

Auto bailout fallout: George Voinovich has officially, once and for all, and irrevocably, torn up his conservative card.

His latest press release says that “Congress failed the auto industry.” No George, GM and Chrysler failed on their own, and YOU failed us.

At a minimum, Voinovich should retire in 2010. In the meantime, the potential damage he can and probably will do as designated filibuster-buster in the upcoming Congress is severe. The Dems won’t need Al Franken when they can peel off any two of the following, depending on the nature of the legislation involved: Collins, Hatch, Lugar, McCain, Snowe, Specter, Voinovich, or any unnamed Republican who wants to be seen as “having grown in office” for a couple of days in the New York Times.

Voinovich badly needs to be taken out in the 2010 GOP primary. I’m even leaning towards willingness to take my chances on a Spring 2009 resignation followed by a special election in November. Ham Sandwich currently has my vote.


AJ Strata makes a pretty good case that some taped conversations between Rod Blagojevich and unnamed “DC advisors” are with Obama advisors.


US Senator Imhofe’s Environment and Public Works Committee (HT Alex Jones at Info Wars) tells us that a major pushback against what I refer to as globaloney (the belief that catastrophic global warming is occurring, that humans are causing it, and that radical changes in how society is organized must be forced on the world to stop it) and globlarmism (the incessant claims that “we must act now” to deal with the just-noted notions, or we’re all doomed) is coming:

The UN global warming conference currently underway in Poland is about to face a serious challenge from over 650 dissenting scientists from around the globe who are criticizing the climate claims made by the UN IPCC and former Vice President Al Gore.

….. The U.S. Senate report is the latest evidence of the growing groundswell of scientific opposition rising to challenge the UN and Gore. Scientific meetings are now being dominated by a growing number of skeptical scientists.

Let’s hope so, and that it doesn’t let up. As I’ve said frequently, “Consensus, Conschmensus.”


This is not to minimize the alleged horrors visited on very well-to-do clients in the Bernard Madoff situation — but there is a sort of silver lining.

Madoff has apparently already soaked the rich to the tune of $50 billion (that’s not a typo), meaning that the incoming Obama administration doesn’t have to.

December 15, 2007

Couldn’t Help But Notice (121507)

From the “I Don’t Think So” Department:

(Hillary Clinton) is in danger of losing all four early contests, including Nevada and South Carolina – probably to Sen. Barack Obama, who is now, in momentum terms, the Democratic frontrunner.

Drudge yesterday linked to another article about Mrs. Clinton asking “Is It the End?” That’s an alltime record for premature e-celebration or premature e-desolation, depending on your point of view.

It’s possible that it really looks that bad for her. But given Fineman’s and his magazine’s bootlick-level support of the Clintons over the years, I believe this is an orchestrated attempt at expectations management (yes, with a dash of desperation) — to be (she hopes) followed by “The Comeback Kid,” Part II.

Interestingly, and contrary to popular folklore, the PBS “Comeback Kid” link does NOT give any credit to Hillary for coming up with Part I.

Update: More expectations management — Bill Clinton told Charlie Rose Friday night that “It’s a miracle she even has a chance” to win in Iowa.


Having said that, Hillary definitely did not have a comeback for this (a YouTube vid with just the exchange below is here. A NewsBusters link to longer vid is in third para at this post, where the sequence below is near the very end. The rest of the NB clip is worth watching, just to see Mrs. Alan Greenspan [Andrea Mitchell] and Tim Russert piling on the Clinton campaign):

Carolyn Washburn (Worst debate moderator — evertwice): Senator Obama, you have Bill Clinton’s former national security adviser, State Department policy director, and Navy Secretary, among others, advising you. With relatively little foreign policy experience of your own, how will you rely on so many Clinton advisers and still deliver the kind of break from the past that you’re promising voters?

BOOHOO (Barack O-Bomba Overseas Hussein “Obambi” Obama): Well, the uh, you know, I am …..

(interrupted by extremely loud and sustained Hillary Clinton-patented “ooh, she got him with that one” cackle)

Hillary Clinton (with taunting “going in for the kill” tone): I want to hear that!

(followed by extremely loud and even longer-sustained Hillary Clinton-patented “ooh, now we’ve got him by the short ones” cackle)

BOOHOO: Well, Hillary, I’m looking forward to you advising me as well.

(sustained laughter and applause)

BOOHOO: I, I, I want to gather up talent from everywhere.

This may be BOOHOO’s “Where’s the beef?” moment.


The same New York Times that did its part for fauxtography is now propping up a faux spokesperson (HT Instapundit).

In totally related news, NYT stock, which closed at $26.55 on June 8, closed Friday at $16.53. That’s a loss of over $1.4 billion in market value in five months. Roughly 5-1/2 years of Bush Derangement Syndrome has exacted a terrible price.


Though I can’t find a link (typically annoying — the CNNMoney April 16 original isn’t there), I thought Alan Greenspan promised, after the last go-round, to lay low on offering what are now no more than the observations of an educated but well-informed outsider whose influence is beyond what is justified. But he didn’t.

Alan, have you ever asked yourself how YOUR predecessor, Paul Volcker, managed to zip it during and after that 508-point market plunge (a one-day, 22.7% decline) on October 19, 1987 during your watch? And, more importantly, why he zipped it?


I never knew Triticale, and he never knew me. I just looked it up; he posted 47 comments here over two-plus years. He passed away on Thursday (HT Jay via Instapundit). I will miss his “rye” style, and offer prayers for the repose of his soul, and his family.

March 12, 2007

Are Thousands of Stock Analysts Rewriting Their Track Records? Could Very Well Be

Megan McArdle, one of those sitting in for Instapundit for a few days, calls attention to this stunner (I/B/E/S is the “Institutional Brokers Estimate System“):

Comparing two snapshots of the entire historical I/B/E/S database of research analyst stock recommendations, taken in 2002 and 2004 but each covering the same time period 1993-2002, we identify tens of thousands of changes which collectively call into question the principle of replicability of empirical research. The changes are of four types: 1) The non-random removal of 19,904 analyst names from historic recommendations (“anonymizations”); 2) the addition of 19,204 new records that were not previously part of the database; 3) the removal of 4,923 records that had been in the data; and 4) alterations to 10,698 historical recommendation levels. In total, we document 54,729 ex post changes to a database originally containing 280,463 observations.

Maybe there’s a perfectly acceptable explanation for an after-the-fact alteration rate of almost 20%, but until I hear it, it’s hard not to think that there is quite the contingent of “grown up” David Lightmans (the main character in the 1983 movie “War Games,” played by Matthew Broderick, who, among other things, hacked into his high school’s computer system and changed his grades) systematically rewriting their history. And I’d not only like to ask the Watergate question (“What did they know and when did they know it?”) of industry CEOs during that period, I’d like to know (again, if this really is abusive history rewriting) what they’re going to do to stop it now — AND to put things back to where they were.

September 1, 2006

Advanced Cell Technology Update

Filed under: Business Moves,Stock Schlock,Taxes & Government — Tom @ 9:15 am

Life News has the details about the true “nature” of the corrections (plural) issued by medical journal Nature regarding what it published in conjunction with the “no embryos harmed” announcement of Advance Cell Technology Inc. (ATC) last week (bold is mine):

Nature Issues Corrections on Misleading Embryonic Stem Cell Research Study
August 31, 2006

Washington, DC ( — A leading medical journal has issued two “corrections” regarding misleading news releases concerning a study conducted by a biotech firm claiming to have created a morally acceptable method of obtaining embryonic stem cells.

Though Advanced Cell Technology said no human embryos were destroyed, in fact all were killed.

A press release from ACT and a statement from Nature on the article it published about the new method both said no human embryos were destroyed.

Ruth Francis, Nature’s senior press officer, explained the need for the corrections in an email to media outlets.

“We feel it necessary to explain that … the embryos that were used for these experiments did not remain intact,” she said.

Later, Francis would not tell the Philadelphia Inquirer why Nature didn’t make that clear in its initial press statement about the ACT paper.

“We are looking into the possibility of further clarification of this paper,” she told the newspaper.

During an interview with the Inquirer before the controversy erupted about the false claims, Advanced Cell Technology vice president Robert Lanza, senior author of the research paper, told the newspaper that “some of the embryos survived and were returned to frozen storage.”

On Wednesday, in a follow-up interview with the newspaper, he said he was referring to human embryos used in similar experiments, but not the ones touted in the Nature article he wrote.

Gee, I’m no scientific expert, but the last two paragraphs sure make it appear that ATC VP Lanza was caught red-handed playing fast and loose with the truth. There’s a three-letter word for that. And Nature may not even be done cleaning up Lanza’s mess.


UPDATE, Sept. 1: California Stem Cell Report has advice for ACT on effective and accurate PR. With all due respect to CSCR, I believe ACT knows exactly what it is doing, and has thus far gotten what they want out of the whole episode.

UPDATE 2, Sept. 1: ACT stock had a recovery day Friday, closing up 10 cents at 71 cents after being as low as 56 cents during the trading day. ACT was down 25 cents (about 26%) for the week. The stock’s recovery may be due to the company fighting back a bit about its work, complete with the seemingly-required Bush-bashing:

Company officials protested that the fate of embryos in their laboratory has no bearing on the scientific value of the research that comes out of it. Using the techniques they developed, they said, future researchers can create stem cells without destroying embryos.

Having such a capability could be useful because U.S. law currently bans federal funding of any research that harms human embryos. In an August 2001 decision, President Bush allowed federal funding for research on the few dozen cell lines that had been created up to that point. But researchers say they need hundreds of lines to move the science forward.

“I think the degree of protest here is the result of the importance of this breakthrough,” said Ronald Green, chairman of Advanced Cell Technology’s ethics advisory board and a professor of religion at Dartmouth College. “If the president were to turn around tomorrow and authorize stem cell lines produced in this way, in two years’ time we could have three to four hundred stem cells lines.”

Other scientists have expressed reservations about the significance of the research, saying that it needs to be confirmed through replication.

Correct me if I’m wrong, but Green conveniently forgets to mention that he and others in the industry can develop all the lines they wish — they just can’t do it using federal funds.


Previous Posts:

- August 27 — Paging the SEC: Investigate Advanced Cell Technology

- August 28 — An Across-the-Board Chorus Blasts Advanced Cell Technology’s Claims

August 31, 2006

Day-End Notes

Because of a cranky Internet connection, a post of a few short items will have to do for the rest of the day:

  • Gee that was quick — Don Wildmon’s American Family Association is calling for a letter-writing and phone-call campaign to protest Wal-Mart’s aggressive “gay-friendly” initiatives earlier this week. In case the Bentonville bunch missed it, he reminds them that what they’re doing is similar to what Ford, who AFA is boycotting, has done.
  • Advanced Technology Inc. (symbol ACTC) is the company BizzyBlog thinks should be investigated by the SEC because of very irregular-appearing trading action both before and after its “no harm to embryos” research announcement, and because an across-the-board group of prolifers, pro-embryonic stem cell researchers, and people with contacts in the investment community all believe that the company overhyped what it had accomplished. As feared, the share price of ACTC has nosedived from 96 cents at the start of the week to 61 cents as of about 2:55 PM Thursday — a drop of over 36%.
  • Mortgage interest rates have gone down six weeks in a row. (MarketWatch link requires free registration).
  • Add up the five months at this link from the Bureau of Economic analysis, and you realize that personal income is up about 2.7% during that time — way more than inflation.
  • Ignoramus of the DayJack Cafferty of CNN, who sees a Bush/Rove conspiracy ….. in the fall of gas prices.
  • Post of the Day — “Americans Hate Their Fabulous Economy” (HT Instapundit). It has great charts showing that the only meaningful difference between the economies of 1996-1999 and 2003-2006 is how people feel about them.

This Is In Case You Think You Can Get Rich on Stock Tip Spam

Filed under: Money Tip of the Day,Stock Schlock — Tom @ 8:03 am

Resist the urge:

While most people know better than to buy a stock based on a spam message, there are clearly enough suckers out there to make it worthwhile. A new study has checked in on the numbers, doing a bit more academic version of the portfolio tracker above. They found that (as you would expect) people who invest in stock that was spammed tend to lose money. However, the people (the spammers) who bought the stock a day or two before the spam tend to make a decent return (sometimes depending on how proficient they are as spammers). While this certainly fits into the “no duh” category of things for most of us, it’s still fascinating to see that there are enough gullible folks out there who actually buy stock based on spam.

Don’t be one of them.

Specifically, the BBC reports that:

People who respond to the “pump and dump” scam can lose 8% of their investment in two days.

Conversely, the spammers who buy low-priced stock before sending the e-mails, typically see a return of between 4.9% and 6% when they sell.

The study recently published on the Social Science Research Network say their conclusions prove the hypothesis that spammers “buy low and spam high”.

The researchers say that approximately 730 million spam e-mails are sent every week, 15% of which tout stocks. Other estimates of spam volumes are far higher.

My estimates of total spam volumes would be much higher too. Sometimes I think half of the volume noted comes into my mailboxes.

August 28, 2006

An Across-the-Board Chorus Blasts Advanced Cell Technology’s Claims

Previous Post: Paging the SEC: Investigate Advanced Cell Technology


Note: This post originally appeared at 8:25 this morning.
It will be kept at the top for the rest of Monday.


Opponents of life-destroying Embryonic Stem Cell Research (ESCR) have vocally spoken out about both the legitimacy and purported moral acceptability of the research claims made by Advanced Cell Technology, Inc. (ACT) in its announcement last week that it had “Generate(d) Human Embryonic Stem Cells that Maintains Developmental Potential of (the) Embryo.”

Objections from the Catholic Church and the prolife community might be seen by some to have been predictable. But that doesn’t explain why pro-ESCR scientists are also blasting ACT’s work and its claims.

From Life News (links within excerpt were added by me):

Catholic Church, Scientists Say New Embryonic Stem Cell Research Claims False

In a rare agreement on the thorny issue of embryonic stem cell research, the Catholic Church and scientists who back the destructive research both agree that a California biotech firm’s claims of creating a new method of obtaining embryonic stem cells without taking human life are false.

Art Caplan of the University of Pennsylvania, one of the top embryonic stem cell research advocates in the United States, called the claims “all hype.”

Advanced Cell Technology published a paper last week in the journal Nature claiming to have used the single-cell biopsy technique called Preimplantation Genetic Diagnosis (PGD) to obtain stem cells from 16 human embryos. However, further examination shows all 16 of the days-old unborn children died in the process.

“The science involved is not going to lead to any sort of ethical breakthrough,” Caplan wrote in an op-ed over the weekend.

Caplan said the cells ACT obtained may not act like embryonic stem cells obtained by the traditional method of killing human embryos. He also said couples would be reluctant to donate human embryos for the research and that the cells may only come from embryos with physical handicaps.

“Ultimately this so-called ‘breakthrough’ does little to quiet the critics of embryo destruction or the proponents of stem cell research using human embryos, such as myself,” he explained.
“What we have here is hype, not hope,” he added.

Top Stanford University researcher Hank Greely agreed.

“From the scientific perspective, never believe anything until it’s replicated several times,” he said. “It will be interesting and important to see if these cells turn out to be the same kind of cells with the same kind of promise as [embryonic] stem cells derived [traditionally].”

We can also add people with some knowledge of the investment community and the ESCR industry to those who don’t believe that ACT has accomplished anything significant. ACT was discussed on last Thursday’s public radio program “Marketplace,” (ram-format audio is at link). This is a program that I am nearly certain airs AFTER the markets close. Assuming I’m correct, following a day in which ACT shares opened at $2.30 and closed at $1.60, a fall over 30% over the course of one trading day, ethicist Glen McGee and Tufts University’s Jan Reichert both expressed severe reservations about the company’s claims:

CLENN MCGEE: Investors just aren’t buying it. I mean they don’t believe this kind of discovery is going to set Advanced Cell Technologies apart and they shouldn’t.

HELEN PALMER (Marketplace reporter): Jan Reichert of Tufts University says ethical issues aren’t the only problem. Stem cell therapy just isn’t ready for prime time.

JAN REICHERT: It’s not being picked up either by biotech or by the major pharmaceutical firms simply because the end use of them is not quite clear yet.

PALMER: Reichert says stem cells need five more years of basic research before venture capitalists will see enough returns in therapies and dollars to tempt them to invest.

Hmm. Somebody DID invest on Friday, two days after ACT’s announcement. Were they fooled?

And a whole lot of people must have thought that the “discovery” would “set ACT apart” on Wednesday (and maybe Tuesday, based on the day-before share price jump of over 50%), only to see the walls come tumbling down on Thursday and Friday (NASDAQ link is here; chart will change when the markets open on Monday):

According to NASDAQ’s web site, ACT has 27.7 million shares outstanding. Note that Wednesday’s, Thursday’s, and Friday’s trading volumes were 32%, 56%, and 36% of the company’s outstanding shares. The company’s 10/31/05 Proxy Statement (PDF; go to Page 5) shows that at that time, officers and directors of the company owned 22% of the company, and fund companies owned another 51%.

The chances that there is something fundamentally not right about all of this, and that financiers and/or public shareholders have been snookered, have to be seen as more than minor. The charges against ACT are not just coming from supposed moral puritans; they’re coming from just about anyone who invests a minimal amount of time looking into what’s being claimed vs. what has really been accomplished.

As I wrote Saturday:

If you think there’s more than a little reason to suspect that the investment funds, the officers, and/or the directors of ATC may have made a financial killing as a result of manufactured (and if Smith is right, now thoroughly punctured) hype at the possible expense of unjustifiably overexcited individual investors — well, so do I.

Earth to SEC: Investigate ACT. You might even consider having someone watch the airports and the borders.


UPDATE: ACT stock (symbol ACTC) closed at 89 cents on Monday, down 7 cents, or 7.3%. Tuesday’s close: 86 cents. Wednesday at noon: 80 cents. Wednesday’s Close: 78 cents (a 3-day, 18.75% haircut).

UPDATE 2, Sept. 7: Michael Fumento gets in his rips, and they’re good ones:

For all the media mania, you’d never know the Lanza publication was just a 200-word letter that spent as much verbiage on theory as actually describing the experiment. As such, Nature had no business running it.

But as I’ve written elsewhere, Nature has long boosted embryonic stem cell (ESC) technology generally and the lifting of federal funding restrictions specifically, as has its American counterpart Science. Their eagerness to run anything promoting this view recently led to Science being forced to withdraw not one but two “ESC miracle breakthrough” articles.

August 27, 2006

Paging the SEC: Investigate Advanced Cell Technology

August 28 Follow-up post
An Across-the-Board Chorus Blasts Advanced Cell Technology’s Claims


NOTE: The post below, which originally went up at 4 PM on Saturday, has been carried forward, and will stay near the top for the rest of Sunday.


Was Advanced Cell Technology Inc.’s Embryonic Stem-Cell Announcement
a Political Ploy, a Financing Gambit, or “Pump and Dump”?

OVERVIEW: Advanced Cell Technology’s Wednesday announcement that it had generated human embryonic stem cells without harming embryos appears to be suspect, and to fit the company’s historical pattern of overhyping things that turn out to be minor developments or non-developments. This time, though, as a publicly-traded company, its announcement, if debunked or deeply discounted (there are many signs that is indeed taking place), may not only impact the ongoing debate over the relative merits of embryonic vs. adult stem cell research, but may put the company in financial jeopardy.


This brief news item was posted yesterday in the San Francisco Bay Area’s weekly business paper, The East Bay News Business Times (bolds are mine throughout this post):

Advanced Cell Technology raises money after stem cell news
East Bay Business Times – 1:55 PM PDT Friday

Just two days after reporting it had developed a new way to generate human embryonic stem cells, Advanced Cell Technology Inc. said it had commitments to raise about $13.5 million.

The Alameda company (OTCBB: ACTC) said most holders of debentures and warrants to buy its stock agreed to exercise their options to buy more. Advanced Cell Technology will raise about $8.5 million that way.

The company will also exercise some of its outstanding warrants to raise another $5 million.

Because of the new agreements, Advanced Cell Technology canceled a proposed private placement through which it had hoped to raise about $11.3 million.

The company said Wednesday that its scientists generated human embryonic stem cells without harming embryos.

Earlier this week, Advanced Cell Technology Inc. (ACTC) announced that:

“….. company scientists have successfully generated human embryonic stem cells (hES cells) using an approach that does not harm embryos.

….. “Until now, embryonic stem cell research has been synonymous with the destruction of human embryos,” stated Robert Lanza, M.D., Vice President of Research & Scientific Development at ACT, and the study’s senior author. “We have demonstrated, for the first time, that human embryonic stem cells can be generated without interfering with the embryo’s potential for life. Overnight culture of a single cell obtained through biopsy allows both PGD and the development of stem-cell lines without affecting the subsequent chances of having a child. To date, over 1,500 healthy children have been born following the use of PGD.”

Current technology derives hES cells from the inner cell mass of later-stage embryos known as blastocysts, destroying their potential for further development. ACT’s approach generates human embryonic stem cells from a single cell obtained from an 8-cell-stage embryo.

If those making the financing commitments haven’t finished their due diligence yet and still have time and the ability to back out, they might consider reading what Wesley Smith (bio here; blog here), a senior fellow at the Discovery Institute and a special consultant to the Center for Bioethics and Culture, found and reported in his most recent Weekly Standard column (HT Life News):

Science by Press Release
More hype from stem cell entrepreneurs

“NEW STEM CELL METHOD avoids destroying embryos,” the New York Times headline blared. “Stem cell breakthrough may end political logjam,” chimed in the Los Angeles Times. “Embryos spared in stem cell creation,” affirmed USA Today. Reporting the same supposed scientific achievement by Advanced Cell Technology (ACT), the Washington Post quoted the company’s bioethics adviser Ronald Green: “You can honestly say this cell line is from an embryo that was in no way harmed or destroyed.”

Unfortunately, you can’t “honestly” say that. The above headlines–like Green’s statement and innumerable similar press accounts around the world–are just plain wrong. While ACT did indeed issue a press release heralding its embryonic stem cell experiment as having “successfully generated human embryonic stem cells using an approach that does not harm embryos,” the actual report of the research led by ACT chief scientist Robert Lanza, published in Nature (abstract is here; page also contains link to report, which costs $30, and which I did not purchase — Ed.; Aug. 30 update — Just to be clear, SMITH DID read the Nature report, and I’m relying on his work and considerable reputation), tells a very different story. In fact, Lanza destroyed all 16 of the embryos he used, just as in conventional embryonic stem cell research.

And that’s not the only facet of Lanza’s work that the press got wrong. The ACT team did do something new: It worked with very early embryos, of 8 to 10 cells each, rather than the 100- to 200-cell blastocysts usually used in such research. From each of these early embryos, the scientists removed not one cell–as several press accounts reported–but 4 to 7 cells. This misreporting is important because it creates a materially false impression.

During in vitro fertilization of an egg, a single cell can be removed from a very early embryo like those Lanza used in his research. Usually this is done for genetic testing, before the embryo is implanted in the mother, and the embryo remains viable–unlike Lanza’s embryos. Lanza did, however, derive two lines of embryonic stem cells from some of the early cells he had removed. Maybe one day someone will succeed in making stem cell lines from an early embryo that survives, but Lanza didn’t. ACT and the media–in their desire to boost popular support for embryonic stem cell research–simply took a leap of faith and portrayed an experiment showing that something might be possible as if the feat had already been accomplished.

….. Lanza’s experiment does demonstrate that stem cell lines can be obtained earlier than previously thought. But that wasn’t good enough for ACT’s publicity office or the lazy reporters who regurgitated the press release. The failure to report this story accurately amounts to massive journalistic malpractice–and once again ACT is laughing all the way to the bank.

Elsewhere in his column, Smith chronicles ACT’s sordid history of faux breakthroughs:

  • A December 3, 2001 cover story by US News that ACT had cloned human embryos, when all it had done was to divide a human egg a few times without getting it to the point of being a viable embryo.
  • A mid-2002 story in Atlantic Monthly about ACT’s attempts to “create a cloned embryo of a young boy named Trevor,” in the hopes of curing a rare disease in the boy. Says Smith: “In reality, of course, there was never any hope of treating Trevor with cloned embryonic stem cells.”
  • In January 2004, Wired Magazine reported that led readers to believe that ACT’s Dr. Lanza “had successfully grown cloned human embryos to the 16-cell stage.” Says Smith: “This would have been big news–if it had been verified. But it never was. To my knowledge, Lanza never subjected his work to peer review or published a report of it in a respected science journal.”

Additionally, I located this CNN story from November 25, 2001, published shortly after “cloned human embryos” announcement (the “December 3″ issue of US News would actually have been published about two weeks earlier). Among other things, it chronicles a four-year history of press releases and announcements that, in retrospect, look more than a little dubious.

Let’s say that ACT is indeed conducting overhyped (and worse) “Science by Press Release,” as Smith alleges and as it appears to have done in the past. There are three big potential problems with what it is doing; one of them appears to be old hat to the company, but the other two represent problems that, because it is now a publicly-traded company, may threaten its very existence.

First, ACT, as it has been for many years, is feeding into what Smith, myself, and many others believe is the myth that life-destroying embryonic stem cell research (ESCR) has potential for curing disease that non-life-destroying adult stem cell research (ASCR) won’t achieve. The contention that ESCR will in the long run accomplish more than ASCR is being proven more tenuous almost with each passing day. In fact, it can fairly be argued, based on this report from last year (“Adult cells found in mice can transform like embryonic ones”) and this one from just a couple of days ago (“Researchers create adult stem cells with embryonic cell features”) that ASCR is moving out of what I referred to in late 2005 as “blocking-and-tackling,” or addressing diseases one at a time, to something with every bit of the potential that ESCR cheerleaders, without substance, still try to claim as their own. By feeding what I believe are the false hopes for ESCR, ACT and other boosters are causing companies, politicians, and voters (see California) to misallocate money to the “Hail Mary pass” that ESCR represents that could have been more productively spent achieving speedier and genuine results with ASCR. It’s not too much of a stretch to say that some people may die needlessly and/or prematurely if funds continue to be misallocated; just because we can’t find the specific bodies doesn’t mean that it isn’t happening, or might not happen.

The poisoning of the stem-cell debate with false hopes for ESCR is bad enough. But the second problem goes back to the beginning of this post, to that $8.5 million the company just announced that it will raise from holders of its debentures and warrants. If those holders are putting in their money based on the company’s press releases and the subsequent hyped-up reports in the press that are not supported, there would seem to be three parties with the potential to take legal action. The holders themselves could claim deception, though presumably, as accredited investors, they’re supposed to be big boys and girls and have the responsibility to do all the necessary digging before investing. Existing public shareholders who are being diluted could take also action if they feel that the company’s hype falsely induced the debenture and warrant holders to dilute shareholders’ interests. Finally, the Securities and Exchange Commission (SEC) might decide that the entire matter requires investigation for all the reasons I just described.

Speaking of the SEC — The third potential problem is one that, if there is reason to suspect it, you would normally expect the Commission to take a very keen interest in — namely, whether ACT’s announcement, if debunked, represents a PR- and news-driven example ofpump and dump” designed to benefit insiders and perhaps others “in the know.”

On the surface, the evidence looks, to put it delicately, less than pristine:

The last few day of the graph are tough to read, so let’s look at the numbers (you can click on the graph at the link to see this at NASDAQ’s site):

The press release was issued on August 23. The stock went up over 50% the day before and volume doubled, indicating that a number of people may have been given the scoop about the pending announcement. The stock went up over 350% ($1.43) on the 23rd, opened another 57 cents higher ($2.30) on the 24th, peaked slightly above that opening, and fell with a thud to $1.60 by the end of the day. The free-fall continued on Friday, to the point where by Friday’s close the stock was down 59% from its Thursday intraday peak. I don’t have a crystal ball, but given the snowballing skepticism, I’d say the chances that the slide will continue on Monday are pretty high.

What about those huge trading volumes on Wednesday, Thursday and Friday? Keep in mind that the company has, according to NASDAQ’s web site, only about 27.7 million outstanding shares. Even considering that some shares probably changed hands multiple times during those three days, the share volumes as a percentage of outstanding shares are extraordinary, especially when you see who owned most of the shares as of October 31, 2005 (link is to the Proxy Statement filed December 5, 2005; info pictured below is at Page 5; I did not see evidence that ownership has significantly changed since then, but I am not certain of that; I’d appreciate an e-mail from anyone who can point me to more current information):

Add the 22.1% of the company owned by officers and directors to the 51% owned by the the four investment funds, and you see that together they own almost 3/4 of the company. Trading volumes for ACT stock on Wednesday, Thursday and Friday were 32%, 56%, and 36% of the total shares outstanding, respectively.

If you think there’s more than a little reason to suspect that the investment funds, the officers, and/or the directors of ATC may have made a financial killing as a result of manufactured (and if Smith is right, now thoroughly punctured) hype at the possible expense of unjustifiably overexcited individual investors — well, so do I.

I will politely suggest that if the SEC isn’t curious about all of this, they’re not doing their job.


UPDATE 1: Here’s another great example of adult stem cell progress.

UPDATE 2: There may be even more machinations involved than the body of the post indicates. First, ACT earlier this year opened a California R&D facility, because they hope to get some grant or venture funding from the $3 billion kitty California voters approved in 2004. Don’t ask me why, but an announcement like ACT’s, even if disproven, could still give the company visibility and credibility with those who are divvying up the money. Second, most of ACT’s principal executive officers have a large number of stock options, which, if exercisable (many appear to be) and actually excercised during the stock runup, could have personally benefitted them in very substantial amounts. There certainly may be other angles I’m not considering but don’t have the ability to investigate because of the company’s complex capital and financing structure.

UPDATE 3: The paragraph below the “daily details graphic” was added at about 5:30 PM on Saturday, and the percentages owned by the funds and all insiders were changed at that time to correct math errors.

UPDATE 4: In an article about the company after the markets closed on Friday, Steve Johnson at the San Jose Mercury News did not address any of the matters noted above, even though doubts had already emerged about the credibility of ATC’s announcement.

UPDATE 5: Yoo-hoo? SEC? — The Washington Post is reporting (HT Instapundit) on several objections from Richard Doerflinger of the U.S. Conference of Catholic Bishops, and that Nature Magazine “corrected wording in a lay-language news release it had distributed in advance and posted clarifying data it had asked the scientists to provide.”

UPDATE 6: Newsweek didn’t let concerns about the ATC announcement’s validity keep it from polling on the matter, including whether the President should “change his position given the new method.” Zheesh — Bush’s position, not specifically explained by Newsweek, is that federal funds should not be used to fund ESCR. The writing is typically ignorant and biased. The sub-headline is “NEWSWEEK Poll: A possibly revolutionary innovation in stem-cell research hasn’t changed American opinions on the topic.” As usual, no distinction between embryonic and adult. The word “embryonic” appears once. The word “adult” to describe stem cells or stem cell research does not appear at all. A less-than informed reader would concude that ESCR is the only kind.

UPDATE 7, August 28 afternoon: Mona Charen has a short post at The Corner on an e-mail she received from one Robert P. (Robby) George (July 6 WaPo co-authored op-ed here; HT Mirror of Justice), who she quotes thusly — “Unfortunately, just about none of this is true. First, the study did not involve the removal of one cell from an embryo that then continued to develop. Instead, researchers disaggregated 16 living embryos, killing them all, and took an average of six cells from each. The 91 resulting embryonic cells were then placed near one another in dishes and allowed to divide. Some divided, while others died, and from the cells that divided researchers were able to produce two lines of embryonic stem cells. In other words, this study does essentially nothing to prove the point that Advanced Cell Technology (the company that carried out the experiments) has argued in the press: that single cells removed from an early embryo and cultured by themselves can produce lines of embryonic stem cells.” Mr. George is McCormick Professor of Jurisprudence, a Professor of Politics, and Director of the James Madison Program at Princeton University.

UPDATE 8, August 28, 1AM: Life News“Company Making Millions on Fake Embryonic Stem Cell Research Announcement”; also, here is a detailed, unfiltered report from Catholic News Agency of exactly what Doerflinger (mentioned in Update 5) said about ACT’s work. August 28, 2PMHere is the USCCB’s official press release.